Escrow: Will homebuyers under the new system be left without a roof?

In recent years, both the population and the demand for housing in Uzbekistan have been growing rapidly, along with the number of new construction projects. In the capital, Tashkent, where most of the population is concentrated, even a small plot of land has become as rare as gold dust. As a result, construction is steadily expanding toward suburban areas. In short, both those who want to buy a home and those who want to build and sell one have multiplied. It is no secret that many people who decided to buy an apartment on the primary market have ended up losing their entire savings. In times when inflation is high and the cost of living keeps rising, people are striving hard to at least own a small one-room apartment. Given that the average monthly salary in Uzbekistan barely reaches six million soums, even comparing it to the price per square meter feels pointless. Even if one is fortunate enough to qualify for a state subsidy, it usually covers only one-third or half of the initial payment. However, today’s topic is not about property prices or people’s purchasing power. We are going to talk about a new system that could bring relief to those who have been saving every penny to buy a home but ended up losing their money or peace of mind — the escrow system.

As you may know, starting from July 1, 2025, the form and content of agreements between developers and buyers in shared construction projects have changed. It is now mandatory for such agreements to be notarized and registered in the cadastral system. Beginning January 1, 2026, the escrow system will be fully implemented, strengthening the legal protection of homebuyers.

What is the escrow system?

Simply put, an escrow system is a service involving a trusted third party that acts as an intermediary between the buyer and the seller. In Uzbekistan, this intermediary role will be carried out by commercial banks. Their main task is to hold the buyer’s payment in a secure account until the construction is completed and the apartment is handed over. Only after all contractual obligations are fulfilled will the funds be released to the developer. In other words, buyers will now pay the bank, not the construction company.

President Shavkat Mirziyoyev first discussed this issue at a meeting in September 2024. His decision was not made by chance — thousands of citizens had fallen victim to fraud. For example, in 2023, more than a thousand people who made payments to “Asia Invest Favorit” LLC for apartments in a new building planned in Tashkent’s Yashnobod district were deceived. The government later formed a special commission to handle the matter. Prime Minister Abdulla Aripov personally oversaw the process, promising that land would be allocated in Bektemir district for construction and that new apartments would be built for the victims by other developers at affordable prices.

“When we studied the documents for two weeks, we found that the contracts for these apartments were not sales agreements. The citizens had actually entered as shareholders in the project. Did you even know you were participating as investors? You are all part of a single company. Those dishonest people who created this pyramid scheme gained so much trust from our citizens that they offered unrealistically low prices — about 3.5 million soums per square meter — promising to hand over apartments by the end of 2025. Because of this scheme, we decided to tighten the legal framework for this sector and will soon propose relevant amendments,” said the Prime Minister.

Not buyers, but investors…

According to the Prime Minister, people often sign documents without reading them, even when buying a home or making payments. Unfortunately, this trend continues. Many buyers are still paying for housing projects that have not even begun construction — at the “pit” stage. By law, an unfinished building cannot be registered in the cadastral system, and without such registration, a sales contract cannot be signed. As a result, buyers who invest in these cheaper, unfinished projects become shareholders and are essentially forced to act as investors. These agreements heavily favor the developer, while ordinary citizens who cannot afford completed apartments are repeatedly deceived.

If any dispute arises between the developer and the tax authorities or a bank, the property could be frozen, seized, or transferred to the bank’s balance sheet as collateral. The buyer is left helpless because, without a valid sales contract, the apartment is not legally considered their property. Even when lucky buyers manage to move into a completed apartment under a shareholder agreement, they often cannot access utilities due to unregistered property documents or other administrative issues. Social media is full of appeals from hundreds of people trapped in such situations. Through the new escrow system, the government aims to increase oversight of these processes and eliminate the shadow economy in the construction sector.

Finally, on January 27, 2025, President Mirziyoyev signed a decree introducing the escrow system for shared construction projects. According to the decree, homebuyers will no longer make payments directly to developers. Instead, developers and banks will jointly open escrow accounts where buyers’ funds will be held until the construction is completed. Developers will not be able to access these funds before the handover.

“The banks will provide these funds as a resource to developers. In this way, banks will serve as a bridge between the developer and the buyer, ensuring that the homes are built on time and with quality,” said presidential spokesperson Sherzod Asadov.

Experts note that developers will not be allowed to attract public investment without first registering their projects on the national “Transparent Construction” information platform. Buyers will be able to monitor this platform, which will contain detailed information about the project’s address, floors, entrances, company documentation, expert reviews, construction start date, and completion deadline.

Another important change under the presidential decree is that once a shared construction agreement is notarized and registered with the cadastral system, the share is officially recognized as property. This means that even before the building is completed, the shareholder will have the right to sell their share as property. The new owner will inherit all the rights previously held by the former shareholder.

The decree also stipulates that the “Transparent Construction” platform must be fully operational by July 1, 2025. Currently, the portal already provides open access to more than 61,000 registered construction projects, over 28,000 facilities with approved occupancy permits, and more than 170,000 expert conclusions.

Is this good news for developers?

It can be said that the decree primarily aims to create a guaranteed system for homebuyers. Given the current state of the market, such a measure was long overdue. Time and again, we have seen — both on social media and in real life — how people have fallen victim to fraudulent developers and false advertising. In an era when every soum counts, some people save for years, others take out loans, and many are forced to rely on high-interest mortgages to buy a home. No matter how hard buyers try, they often end up paying off housing loans for 15–20 years because, as everyone knows, housing prices remain far above average incomes.

But what do developers think about the new system? One construction company representative told QALAMPIR.UZ that not all developers welcome the escrow system. According to him, the system benefits buyers but creates challenges for entrepreneurs.

“Seventy percent of construction companies will disappear,” he said.

His concern is not only about bank-controlled payments but also about strict penalties for missing deadlines or failing to obtain occupancy permits. According to the decree, if construction is delayed more than six months beyond the agreed completion date, the buyer has the right to unilaterally terminate the contract and withdraw their funds from the escrow account. Any extension of deadlines will only be allowed through an additional agreement approved by the buyer.

In conclusion, escrow is still a new system for Uzbekistan. It is too early to predict exactly how beneficial or problematic it will be. Questions remain about how the payment system will function, how many developers can adapt to the new rules, whether new bureaucratic barriers or corruption risks will emerge, and how property prices might change as a result. Only time will tell.